5 Proof of Stake projects that you may choose in 2020
By Rafał - 2020-06-22
As of mid-June 2020, the five projects that make up our list are in order: Tezos, Decred, Waves, Synthetix and Elrond. Since the previous years and more precisely since 2017, proof-of-stake systems have seen an increasing interest from investors who seem to be more and more interested in this means of developing passive income in a simple, long-term way, without having technical skills or hyper-sophisticated equipment. In addition, the main advantage of Proof of Stake is that it does not require large amounts of electricity to secure a blockchain. In the long term, Proof of Stake projects therefore have more sustainable growth and are generally more scalable than other types of blockchain consensus especially POW systems.
Tezos –$1,867,114,387 Market Cap
Tezos is a blockchain protocol imagined by Arthur Breitman and his wife Kathleen Breitman in 2014. The project officially started after an ICO which allowed it to raise 232 million dollars in July 2017, but took some time to really start as the Tezos foundation suffered from an internal legal conflict, which means that the main network was not launched publicly until September 2018. Tezos is a distributed platform enabling autonomous contracts, or smart contracts, that is to say, computer programs whose execution does not require the intervention of a trusted third party. Tezos has a Turing-complete virtual machine and thus competes with Ethereum for the deployment of general-purpose decentralized applications. The platform is powered by a native token, the tez (XTZ), which is the fuel used to pay network usage fees and to reward blockchain validators. Tezos presents itself as a protocol capable of self-amending: it thus has a formal internal governance process capable of agreeing network participants through votes.
Yearly ROI for delegating
Yearly ROI for baking
Tezos Baking collateral
Tezos Baking lock-up period
POS Model in Tezos
Tezos is a liquid proof of stake system that requires one to stake a certain number of Tezos token to participate in the consensus over the blockchain. The process of staking Tezos tokens (XTZ) is called baking. Token holders, also called bakers can delegate their validation rights to other token holders without transferring ownership at all. In Tezos ecosystem, holders can vote on their policies directly or even delegate their voting responsibilities to a delegate who can vote on their policies for them. Furthermore, with this model, anyone can become a delegate, all that one needs to do is to win a person’s trust. The financial entry barrier to become an official delegate is quite low and does not require tons of funds to start with.
In Tezos’ network, investors can find and add blocks to the Tezos blockchain through a process called “baking.” The baking process is quite simple to understand and consists of several steps. First, Bakers get block publishing rights based on their stake amount. Each block is thus baked by a random baker and then notarized by 32 other random bakers. Then if the current block is validated, it will gets added to the blockchain. Finally, the successful baker gets a block reward and can charge transaction fees for all the transactions inside the block. By delegating their baking rights to other holders without letting go the ownership of their tokens, the main baker will share the rewards with the rest of the delegates.
Where to stake Tezos tokens?
Decred –$178,455,543 Market Cap
At the initial launch of the Decred project in February 2016, the developers made the choice not to sell their assets for a period of 1 year. The company has also committed not to sell its parts for a period of 24 months. However, these coins can be used to purchase lottery tickets and participate in the PoS transaction validation program. Decred did not use an ICO program to kickstart the project. Instead, 8% of the total amount was pre-mined, then distributed, up to 50% for people who invested money in the creation of the project, and up to 50% for an airdrop. This represented 1.68 million pieces, out of the 21 million of the total possible quantity. Decred was designed and created to overcome some of the problems that Bitcoin encountered during its existence. The founders of the projects are early adopters of BTC, but according to them, there were some things that needed to be changed in the way the most famous cryptocurrency works. DCR coins are the native currency used within the Decred ecosystem and network for governance and proposals.
Yearly ROI for delegating
Yearly ROI for contributing to a split ticket
Split Ticket minimum
Delegate Lock-up period
A POS/POW hybrid systemDecred works according to a hybrid system mixing Proof of Work (PoW) and Proof of Stake (PoS). The basic principle behind this system is that each block must be mined and then validated by at least three verifiers. This helps to mitigate the weaknesses of each of the individual consensuses. Minors receive a reward, and auditors also receive a small reward. Mining with Decred Proof of Work (PoW) works the same way as for Bitcoin. The miners compete to solve mathematical calculations and those who solve the problem quickly pocket the reward. And once the block is mined, to be added to the blockchain, it must be validated by three different validators. This is where the Proof of Issue (PoS) verification system comes in. This verification system is open to all owners of DCR parts. By using DCR coins, it is possible to buy a ticket to participate in the validation of transactions. These tickets have their price determined by the network, automatically and currently stand at around $ 143 ( From https://dcrdata.decred.org/)
When users have purchased a ticket, it will be included in a block. After 256 blocks, the ticket will be "validated" by the network, and the user will be able to participate in the lottery to validate the transactions. By design, Decred gives a 50% chance of becoming an auditor within 28 days of entering the lottery. This chance goes up to 99.5% within 4 months, which is the deadline before a lottery ticket expires. When drawn, the owner will receive the amount of the ticket plus a stake reward for helping to verify the transaction. In 0.5% of cases, the owner will lose the initial investment. Thanks to this system, users are encouraged to block their DCR coins for a certain period of time, as long as they are drawn by lottery. And unlike some PoS systems, investors do not need to keep a computer running all the time but can simply join a staking cooperative which will validate the transactions directly. In order to avoid concerns related to the different forks, Decred has set up a voting system, where each member of the community can decide if a change should be made to the protocol. This system is divided in 2 parts : Politeia, a semi-decentralized system allowing the community to vote on proposals with a "directional" vocation and the Decred Change Proposals, or DCP, which aim to concretely implement the changes to the consensus requested by Politeia votes, when there are any.
Where to stake DCR?
Trusted Wallets :
Synthetix – $149,095,527 Market Cap
Synthetix Network is an initially stable coin project which was born under the name of Havven (HAV). The rebranding took place on November 30, 2018 to better reflect the new nature of the project. In short, Synthetix's main mandate was to offer a stable token whose value was not guaranteed by traditional currencies blocked in a bank account, but by cryptocurrencies. This approach has the advantage of making things more transparent since the open nature of the blockchain. Indeed, it allows anyone to check if the assets are really mobilized in order to guarantee the value of stable tokens. That said, Synthetix was facing stiff competition on the stable corner front. The project therefore focused on the creation of a multitude of synthetic assets that can be traded on its exchange. Synthetix tokens (SNX) were issued on the Ethereum blockchain but today there is an EOS version existing too. Today, Synthetix is a decentralized protocol for the deployment of goods on the Ethereum network. But the project also includes the development of different interfaces to this protocol which have various interesting functionalities like Synthetix.Exchange. The deployment of these goods is achieved through Ethereum tokens called Synths which can replicate the value of cryptocurrencies such as Bitcoin or Ether, but also more traditional actions such as Apple stocks (AAPL) for example. The protocol uses its own Ethereum token, the SNX, to ensure the proper functioning of its services. Thus, the SNX is used as a guarantee to ensure the stability and liquidity of the various Synths offered to users.
Yearly ROI for staking
Yearly ROI for lending Synthetix network token
Staking and Synths
The SNX is not only a loyalty token that allows customers to benefit from various discounts and advantages when using project services. It is indeed at the middle of the functioning of Synthetix and in particular makes it possible to guarantee liquidity and limit the effects of slippage during transactions. In fact, each proposed Synth is backed by a guarantee from SNX with a ration of around 750% currently, which could be modified by a vote of the community. SNX tokens are mainly designed to be blocked in the system since the latter offers many advantages during the staking of these. Indeed, blocking SNX allows investors to receive part of the costs of the Synthetix exchange platform. Having blocked SNX also allows to receive new SNX on a daily basis through the inflation policy implemented by the protocol. The SNX creation rate is 1.25% per week until August 2023 before falling to 2.5% per year thereafter.
Synths are therefore derivative products which reproduce different goods in a decentralized manner. Today there are Synths linked to fiat currencies like sUSD or sEuro, Synths linked to cryptocurrencies like sBTC, Synths linked to assets like sXAU or sXAG which respectively represent gold and money in the financial markets.
If investors hold SNX, they can do a creation of Synths. In order to mint these, they must interact with the Synthetix smart-contract and follow few easy steps. The smart contract will verify that the operation is feasible, in particular that the SNX guarantee ratio is well above 750%. The number of Synths created is added to the Synthetix debt register which allows the Synths currently in circulation to be established. The Synthetix smart contract will thus interact with that of the specific Synth which will create new tokens and automatically distribute them to the user. Investors can then repay their debts in order to recover the secured SNX. The last step is to destroy the Synths via the Synthetix smart contract so that they are withdrawn from circulation and the debt is deleted from the register. Following this operation, the number of Synths in circulation is updated and the previous SNXs become transferable to the wallet.
Where to stake SNX?
Trusted Wallets :
Waves – $120,765,073 Market Cap
WAVES aim to be a platform for creating, transferring and exchanging customizable tokens using blockchain technology. Many organizations can easily create their own dematerialized currency for operational and company purposes. Waves was launched for the first time in 2016, with a stable version officially launched in February 2018. The main idea behind Waves is to offer an alternative to the existing problems with Bitcoin and ICOs that appear almost daily. Waves is trying to solve the main problem with the purchase and sale of cryptocurrencies, access to which is limited to state currencies: euro, dollar and more. The main idea is to create a decentralized channel for trade and crowdfunding, using secure and reliable tokens. It creates an exchange market for digital assets, and it creates a crowdfunding solution. In short, it gives investors the ability to launch, distribute and trade their own crypto token. Waves was created in 2016 thanks to crowdfunding which raised around 30,000 Bitcoins. Even today, Waves operates as a fully decentralized, controllable and transparent platform well-reputed in the crypto sphere.
Yearly ROI for leasing
Yearly ROI for running a full node
Node amount minimum
Can be canceled at any time
The Leased Proof of Stake (LPoS) system was fully launched in May 2017, allowing users of the Waves lite client those who do not operate a full node to rent their WAVES tokens to mining. The rented WAVES are blocked in the wallet of the user renting their funds and cannot be transferred or exchanged. However, the tokens remain under the total control of the account holder and the rental contracts can be canceled at any time. WAVES tokens which are rented to a mining node are used to increase the stake of the miner which increases his chances of finding the next block. The rented participation proof system improves network security in at least two ways. First, the more WAVES investors use to secure the network, the better, as it becomes more difficult for an attacker to accumulate the tokens necessary to carry out an attack at 51%. Second, WAVES can be rented to a node from the user's cold storage address, but the node itself, which remains online, may have only a minimal balance. This considerably reduces the risk of hacking WAVES tokens on the connected computers since the leased funds are not transferred to the minor at all.
Where to stake Waves tokens?
Trusted Wallets :
Elrond – $ 54,843,396 Market Cap
The Elrond project was born in 2017 in Sibiu in Romania with the main goal to completely redefine the public blockchain infrastructure with an emphasis on security, efficiency, scalability and interoperability. To achieve this objective, the Elrond blockchain is based on three principles: Adaptive State Sharding, Secure Proof of Stake (SPoS) consensus and the Battle of Nodes. Elrond's mission is to create a platform capable of meeting the global demand for transactions. The Elrond network is accompanied by numerous masternodes which allow rapid transactions at low cost. In addition, Elrond also hosts decentralized applications (dApps) as part of real use cases. In just 3 years, the Elrond project team has developed a network capable of processing up to 11,500 transactions per second (compared to only 5 to 7 transactions for Bitcoin or 15 for Ethereum). With a simplified user interface, Elrond also wishes to promote the massive use of blockchain among populations.
Yearly ROI for staking
For the functioning of its blockchain, Elrond uses a new approach to the consensus of Proof-of-Stake, called Secure Proof of Stake. This consensus innovates in the way the validation nodes: masternodes are selected from a shard and also in the measures taken by the validators to complete the process of validation of the transactions as efficiently as possible. At the start of each block creation cycle, the SPoS selects validators using a source of chance that cannot be predicted or influenced. The time required for the random selection of the consensus group is exceptionally short (around 100 ms, often less). This also makes it possible to obtain cycles of the order of only a few seconds. The main advantage of having such short cycles is that of network security. The SPos is based on the principle that a malicious actor cannot adapt faster than the time allowed by a cycle in order to influence in any way the block that will be proposed. Like other consensus based on PoS, SPoS selects validation nodes according to the quantity of ERD corners staked by their operators.
In addition, an individual note also accompanies each validator. This rating expresses the past behavior of the validator and is considered when selecting by consensus: validators with a higher rating are more likely to be selected than the others. In most cases, the mark of a validator is automatically adjusted with each cycle. In this way, SPoS encourages meritocracy among validators, by encouraging their operators to maintain their proper functioning.
Where to stake ERD coins?
No official and reputed wallet is currently supporting Elrond stakingDisclaimer: This article does not constitute an investment advice. The products and services referred to in this article may not be suitable investments for you and you should seek professional investment advice before making a decision to invest in any of the products or services mentioned in this article.